Atlantic Lithium forecasts US$4.8B in revenue from Ghana project

Atlantic Lithium (AIM: ALL), an Australia-based miner seeking to unlock electric car battery resources in West Africa, said its proposed operation in Ghana will generate nearly US$5 billion in revenue over its 12.5-year lifespan.

The Ewoyaa project, about 120 km west of the capital, Accra, has a net present value of US$1.3 billion at a discount rate of 8% with expected free cash flow of US$2 billion, according to a pre-feasibility study released on Thursday. The study pegs the internal rate of return at 244% and average annual earnings before interest, taxes, depreciation and amortization at US$248 million.

However, the study lowered the project’s production estimate and increased its capex requirement. Ewoyaa now aims to process 225,000 tonnes a year of 6% lithium spodumene concentrate  beginning in the third quarter of 2024, the company said. That’s down from 300,000 tonnes a year previously because a coarser crushing unit is forecast to reduce recoveries to 62.5% from 68.5%.

Capex increases to US$125 million from US$70 million because the company is bringing processing in-house instead of contracting out, according to the study. Other costs included a longer high-voltage power line and inflation, the company said.

A new resource estimate on the Ewoyaa lithium deposit in Ghana had expanded the compliant resource base by 42%. Credit: Atlantic Lithium.

A 2-million-tonne-a-year dense media separation (DMS) plant will tap proven and probable reserves of 18.9 million tonnes at 1.24% lithium oxide. The inferred resource estimate is 9.6 million tonnes at 1.19% lithium oxide.

“Ewoyaa benefits from simple mineralogy, low power and water consumption, a DMS-only process flow-sheet design, skilled workforce and proximity to operational infrastructure, including grid power, sealed road and deep-sea port,” Atlantic Lithium interim chief executive officer Lennard Kolff said in a press release. “These fundamentals are arguably among the best in the world and enable a low carbon footprint project.”

Canaaccord Genuity Capital Markets kept its speculative buy rating on the stock, noting the capex increase for on-site crushing would keep operating expenses of US$278 a tonne in line with the analyst’s estimates.

“Economic fundamentals remain attractive for the project, with only two major undeveloped hard-rock projects [being] less capital intensive,” analysts Alexander Bedwany and Reg Spencer wrote in a note on Thursday. They cited Grota do Cirilo in Brazil and Goulamina in Mali as the other two.

“The estimated construction time remains 12 months (in line with our current assumption),” they said. “While the (study) assumes a 12.5-year mine life, we strongly believe this will be extended as exploration activity leads to resource expansion and reserve conversion.”

The company, which also has two lithium applications pending in neighbouring Ivory Coast, is riding the rising demand for electric car batteries made with lithium. Auto manufacturers around the world are switching over from fossil fuels and countries are targeting zero-emissions goals to fight climate change.

Atlantic Lithium made a switch of its own a year ago, changing its name from IronRidge Resources and spinning off its gold interests — also focused on Africa — into a new unlisted company, Ricca Resources.

Ewoyaa’s operating costs include a discount of US$165 per tonne for by-products such as feldspar, the study shows. It used a long-term average spodumene (SC6) price of US$1,359 a tonne while citing that equivalent grades have been as high as US$7,708 a tonne on the Pilbara Minerals BMX platform.

“Every US$100 a tonne increase in the SC6 price forecast results in an additional 9% increase to the post-tax net present value, highlighting the significant potential value uplift to the project,” Kolff said.

The project is supported by a US$103 million investment from Belmont, North Carolina-based Piedmont Lithium (NASDAQ: PLL), a miner with projects in Tennessee, Quebec and its home state. “We are excited to continue advancing the Ewoyaa Lithium project through the next stages of studies and permitting towards production,” Kolff said. “The resource infill and extensional drilling program underway is nearing completion.”